vs. ) CASE NOS. 83-241
Intervenor. )
These matters came on for hearing on August 24, 25 and 26, 1983, in Miami, Florida, before the Division of Administrative Hearings and its duly appointed Hearing Officer, R. T. Carpenter. The parties are represented by:
For Petitioner: James C. Hauser, Esquire Biscayne Medical John H. French, Jr., Esquire Center, Inc., Post Office Box 1876
Case No. 83-241 Tallahassee, Florida 32302
Parkway General Keith E. Rounsaville, Esquire Hospital, Inc., Harold W. Mullis, Jr., Esquire Case No. 83-242 Post Office Box 1102
For Respondent: Claire D. Dryfuss, Esquire
G. Steven Pfeiffer, Esquire
These cases arose on the amended applications of Petitioners who seek Certificates of Need (CON) to develop cardiac catheterization units at their
respective hospitals. Respondent initially proposed denying both applications but ultimately took the position that one application should be granted.
Hearings on the applications were consolidated on joint motion of the parties.
Intervenor subsequently filed a similar application and demonstrated a substantial interest in these proceedings. However, it did not seek intervention until the hearing had been concluded, and thus presented no evidence.
All parties submitted proposed findings of fact and conclusions of law. to the extent these proposed findings have not been adopted or otherwise incorporated herein, they are found to be subordinate, cumulative, immaterial, unnecessary or not supported by the evidence.
Parkway Regional Medical Center, Inc. (formerly Parkway General Hospital, Inc.) is a Florida corporation, wholly-owned by American Medical international, Inc., of Beverly Hills, California. Parkway is located at 160 Northwest 170th Street, North Miami Beach, Florida.
Biscayne Medical Center is wholly-owned by Humana, Inc. of Louisville, Kentucky. Biscayne is located at 2801 Northeast 209th Street, Miami, Florida.
Both Parkway and Biscayne are located in DHRS District XI, and both propose to establish adult cardiac catheterization capabilities in DHRS District XI.
The Local Health Council for District XI has not formally adopted its district plan. Both the Parkway and Biscayne applications are consistent with the State Health Plan. (Stipulated).
In March, 1983, DHRS sent a letter to hospitals throughout Florida requesting information concerning the number of cardiac catheterization procedures performed in their laboratories during the calendar year 1981 and the number of cardiac catheterization laboratories now in use.
Based upon information received in response to this letter, DHRS prepared an inventory which contains the following for District XI:
FACILITY | NUMBER OF ADULT CATHS. | NUMBER OF ADULT LABS. |
American Hospital of Miami | 531 | 1 |
Baptist Hospital of Miami | 416 | 1 |
Cedars of Lebanon Hospital | 367 | 1 |
Jackson Memorial Hospital | 905 | 1 |
Mercy Hospital | 494 | 1 |
Miami Heart Institute | 1,268 | 1 |
Mount Sinai Medical Center | 872 | 2 |
South Miami Hospital | 485 | 1 |
St. Francis Hospital | 535 | 1 |
University of Miami |
|
|
Hospital & Clinics | 71 | 0 |
| 5,942 | 10 |
Although the DHRS survey letter requested information regarding number of catheterization "procedures," some of the hospitals responded on the number of patients catheterized rather than the number of procedures. This resulted in an understatement of procedures, since some patients receive multiple procedures.
Rule 10-5.11(15)(d), F.A.C., defines "procedure" as follows:
Procedure means an angiographic study, a physiologic study or a therapeutic activity within a cardiac catheterization laboratory which utilizes the equipment customarily used in cardiac catheterization.
DHRS plans for cardiac catheterization on a two-year planning horizon. Therefore, the need for Parkway's and Biscayne's proposals should be determined based on projected procedures and population in the year 1986, since the decision is to be made in 1984.
The DHRS 1986 population projection for District XI (persons 15 years and older) is 1,529,144.
The DHRS inventory reflects 5,942 adult catheterization procedures performed in District XI hospitals in 1981. Rule 10-5.11(15)(1), F.A.C., contains a formula for determining need for additional cardiac catheterization laboratories. One step in the need determination methodology is calculation of the 1981 use rate. Utilizing the 5,942 procedures contained in the DHRS inventory, the 1981 use rate for District XI is 424.73 procedures per 100,000 population.
Applying the need determination methodology in Rule 10-5.11(15)(1), F.A.C., to the 1981 use rate and projected population for District XI, the number of adult cardiac catheterization procedures projected for District XI from 1981 through 1986 is as follows:
YEAR | POPULATION 15 AND OVER |
1981 USE |
RATE | NUMBER PROJ. PROCEDURES |
1981 | 1,399,299 | 424.73 |
| 5,942* |
1982 | 1,427,404 | 424.73 |
| 6,061 |
1983 | 1,455,477 | 424.73 |
| 6,180 |
1984 | 1,483,615 | 424.73 |
| 6,302 |
1985 | 1,511,721 | 424.73 |
| 6,422 |
1986 | 1,529,144 | 424.73 |
| 6,494 |
* Actual number of procedures reported in DHRS inventory.
Current information from each of the District XI hospitals with adult cardiac catheterization laboratories shows that application of the need methodology formula in Rule 10-5.11(15)(1) understates the number of adult cardiac catheterizations actually performed in District XI in 1982 and 1983, as follows:
| ACTUAL PROCEDURES | ACTUAL YTD |
PROJECTED |
1982 | 1983 | 1983 |
Mercy | 441 | 317 | 543 |
Cedars | 401 | 333 | 571 |
Miami Heart | 833 |
| 486 |
| 833 |
St. Francis | 917 |
| 495 |
| 990 |
JMH | 986 |
| 580 |
| 994 |
American | 576 |
| 321 |
| 550 |
Baptist | 618 |
| 517 |
| 886 |
S. Miami | 512 |
| 417 |
| 715 |
Mt. Sinai | 983 |
| 647 |
| 1,109 |
| 6,267 |
| 4,113 |
| 7,191 |
Actual Use Rate 1982 - 439.17
Projected Use Rate 1983 - 494.23
For District XI, from 1980 through 1982, the use rate increased by 9 percent in 1980, 7 percent in 1981 and 3 percent in 1982. If the number of adult cardiac catheterization procedures actually performed in 1983 is projected for a full year, the District XI use rate would have increased by 12-1/2 percent in 1983.
Rule 10-5.11(15)(o) provides that additional cardiac catheterization laboratories will not be approved where they would reduce the average volume of procedures performed by existing and approved laboratories in the service area below 600 adult procedures.
Assuming an average of 600 procedures per lab, utilizing the projected number of procedures for 1986 and the use rates calculated for 1981, the number of adult cardiac catheterization laboratories required in District XI for 1986 would be 0.8.
In accord with DHRS' policy, the 0.8 laboratory should be "rounded up" to 1.0. Therefore, under DHRS' interpretation of Rule 10-5.11(15), correct application of the need formula demonstrates a need for 1 additional adult cardiac catheterization laboratory in District XI. Initially, DHRS took the position that the 0.8 (0.7 for 1984) should be rounded down. However, this view was corrected by later testimony which established that the DHRS procedure is to "round up" such fractions.
Parkway's emergency room is the third most active in Dade County and is the major emergency room between downtown Miami and the Broward County line. Parkway's proposed cardiac catheterization laboratory will be located on the same floor as and adjacent to the coronary care unit and the emergency room.
Parkway's proposed cardiac catheterization laboratory will be dedicated solely to cardiac catheterization with the capability of mobilizing 24 hours a day, 7 days a week. Parkway's proposed cardiac catheterization laboratory will contain appropriate staffing and equipment.
Based upon the number of patients referred by Parkway cardiologists to other institutions in the Miami area having cardiac catheterization facilities, Parkway projects utilization of its proposed cardiac catheterization laboratory in the first year of operation to be 250 to 300, increasing to 400 in the second year.
Parkway does not intend to perform coronary angioplasty in its proposed cardiac catheterization laboratory but does intend to perform streptokinase procedures on an emergency basis on patients exhibiting acute chest pain and EKG abnormalities.
Parkway has a written agreement with Cedars Medical Center pursuant under which Cedars will accept open-heart surgery patients from Parkway. Travel time from Parkway to Cedars under normal conditions is fifteen minutes.
Biscayne's proposed adult catheterization equipment will be installed, and the procedures will be performed, in its "Special Procedures" Room, rather than a separate cardiac catheterization laboratory.
If approved, Biscayne's cardiac catheterization laboratory would be available 24 hours a day and seven days a week on an "on call" basis. However, the anticipated regular hours for the laboratory will be 7:00 a.m. to 3:00 p.m., five days a week.
Biscayne will staff its laboratory with a cardiopulmonary nurse, an x- ray technician, and a registered nurse.
Biscayne proposes to perform only "diagnostic" cardiac catheterization procedures for the diagnosis of coronary artery disease. Biscayne takes the position that therapeutic procedures such as streptokinase and angioplasty are not medically safe without an in-house open heart surgery program.
Biscayne has a written transfer agreement with Jackson Memorial Hospital in Miami whereby all Biscayne patients requiring open heart surgery will be transferred to, and accepted by, Jackson for such treatment. The driving time between Jackson and Biscayne is twenty minutes.
Biscayne projects 300 cardiac catheterization procedures in its first year of operation and 400 procedures in the second year of operation. These projections are based on the number of patients Biscayne cardiologists currently transfer to other hospitals for cardiac catheterization and an assumed capture rate of 60 percent of all potential procedures generated in Biscayne's service area.
Biscayne's "special procedures" room is a multipurpose facility which will be shared with the radiology department. The latter operates three radiographic/fluoroscopic rooms (R&F) and one "special procedures" room. All four rooms are equipped for doing routine radiographic studies and special procedures.
"Special procedures" as used by Biscayne refers to investigational studies for the diagnosis of medical conditions through the use of special imaging equipment, such as x-ray and fluoroscopy. About 1400 special procedures were performed at Biscayne in 1982. These procedures were performed in various areas of the hospital, including the R&F rooms, the special procedures room, surgical suites and the critical care unit. Special procedures normally take about one hour to complete.
However, the procedure known as angiography is only performed in Biscayne's special procedures room. An angiogram involves an investigation of blood vessels by means of x-rays of injected substances or dyes. Last year, about 400 of the 1400 special procedures performed at Biscayne were angiograms.
Angiographic studies of all blood vessels except the coronary arteries are currently performed in the special procedures room. Angiographic studies of the coronary arteries require cardiac catheterization equipment.
Over a year ago, DHRS issued Biscayne a certificate of need to renovate and replace equipment in two R&F rooms and the special procedures room. Also, digital angiographic equipment was added to for the special procedures room.
Per this certificate of need, Biscayne has purchased the new equipment and renovated these rooms. Construction was scheduled to be complete in October, 1983, but has been delayed.
Biscayne will not have to purchase all new equipment (as will Parkway) to add cardiac catheterization capabilities to its special procedures room. Instead, special General Electric equipment will be added to the existing angiographic equipment which will enhance its capabilities to include cardiac catheterization.
As a result, Biscayne can provide cardiac catheterization at a projected additional cost of $298,566 compared to Parkway's projected cost of
$822,701. However, Biscayne's projection does not recognize that some of the special procedure facility costs should be allocated to cardiac catheterization.
Biscayne's pro forma income statement for the cardiac catheterization project allocates 43 percent usage of the special procedures room to this function. As noted by Parkway, a 43 percent special procedures room equipment cost allocation would raise Biscayne's cardiac catheterization capability costs to $683,314.
Biscayne does not intend that the inclusion of cardiac catheterization capability will lower the number of special procedures that will be done in a normal eight-hour day. The capacity of the special procedures room as stated by Biscayne's Director of Radiology and supervisor of Biscayne's proposed special procedures room/catheterization laboratory, is 6 per day, 5 days week, for an annual total of 1,560.
Biscayne's CON application for the special procedures room projects 1,484 special procedures in the first year and 1,524 in the second year, allowing for 76 additional procedures in the first year and 36 in the second year. Biscayne projects 300 cardiac catheterizations in the first year and 400 in the second year, thereby exceeding the capacity of the combined special procedures room/cardia catheterization laboratory by 224 procedures in the first year and 364 in the second year.
Biscayne's proposed sharing of special procedure facilities is a cost savings measure, and in this respect is superior to Parkway's proposal. Although Biscayne could mobilize its cardiac catheterization laboratory on an emergency 24 hour, 7 day basis as required by DHRS Rule (discussed below), it would likely encounter scheduling and use conflicts under true emergency conditions, or even full utilization as noted above.
Parkway argues that Biscayne's shared facility plan violates American Heart Association guidelines recommending cardiac catheterization labs be dedicated solely to this use. However, the evidence did not indicate that departure from this guideline would have any adverse impact on the quality of care provided.
Parkway is located in Northeast Dade County directly on the Golden Glades Interchange, where Interstate 95, the Florida Turnpike and the Palmetto
Expressway intersect. The majority of Parkway's service area is in Dade county, and 86.17 percent of Parkway's patients come from Dade County.
Biscayne is located in Northeast Dade County near the Broward County line. The majority of Biscayne's primary service area is within Broward county, and more than 60 percent of Biscayne's patients originate from Broward County. Broward County is within DHRS District X.
Comparative statistical information demonstrates that Parkway is more fully utilized, delivers more acute care and has greater patient activity than Biscayne:
BASIC STATISTICAL
INFORMATION | PARKWAY | BISCAYNE |
Licensed Capacity | 412 | 458 |
Beds in Service | 412 | 330 |
Discharges | 12,917 | 9,202 |
Average Length of Stay 9.1 days 8.1 days Patient Days 110,385 79,634
Occupancy 73.4 percent 47.6 percent Bed Mix
Med-Surg. 394/72.9 percent occ. 284/65.2 percent occ. Intensive Care 18/89.9 percent occ. 26/77.5 percent occ.
E.R. Utilization
Visits 27,520 13,110
The Hospital Cost Containment Board (HCCB) was formed in 1979 to monitor hospital costs/charges and to encourage cost containment for Florida hospitals through public awareness and the dissemination of information to the public. The HCCB is a division of the Florida Department of Insurance.
Each year, the HCCB collects the prospective budget of each hospital sixty days prior to the first day of the fiscal year for each hospital. The HCCB reviews the data and budget submitted by a hospital, and then determines to accept the budget, reject the budget, or call a public hearing to make the hospital justify its budget. All HCCB action is based on the figures and budgets submitted by the hospitals themselves.
The HCCB reviews the financial data submitted to it by various criteria which it labels "screens." The "total net revenue" screen is one of the screens utilized to compare a hospital's average patient charge to others in its peer group. "Total net revenue" refers to the amount of money a hospital actually receives for services provided to patients after all deductions are subtracted.
In addition, the HCCB "adjusts" its various financial screens to eliminate the effect of outpatient care and revenues from inpatient activity. Thus, the screens are labeled, for example, as "adjusted revenues" or "adjusted costs."
Comparisons between Biscayne and Parkway by using HCCB calculations of data and projections submitted by the two hospitals indicate the following (1983 budgets):
Cost to the hospital per adjusted admission
Cost to the hospital per adjusted day
Total net revenue per adjusted admission
Total net revenue per adjusted day
PARKWAY BISCAYNE PARKWAY OVER
BISCAYNE DOLLARS PERCENT
$3954 | $3438 | $516 | 15.0 | percent |
$ 458 |
$ 393 |
$ 65 |
16.5 |
percent |
$4263 |
$3595 |
$668 |
18.6 |
percent |
$ 494 |
$ 411 |
$ 83 |
20.2 |
percent |
Comparisons using the same screens for 1984 budgets are as follows:
PARKWAY BISCAYNE PARKWAY OVER
BISCAYNE DOLLARS PERCENT
$4033 | $3563 | $470 | 13.2 | percent |
$ 498 |
$ 422 |
$ 76 |
18.0 |
percent |
$4346 |
$3726 |
$620 |
16.6 |
percent |
$ 537 |
$ 442 |
$ 95 |
21.5 |
percent |
Cost to the hospital per adjusted admission
Cost to the hospital per adjusted day
Total net revenue per adjusted admission
Total net revenue per adjusted day
As indicated, Parkway's costs to provide hospital services and patient charges for these services have been, and are projected to be, substantially higher than those for Biscayne.
Per Adjusted Admission 65.1 percent 48.4 percent Per Adjusted Day 65.8 percent 42.8 percent
In addition to being more expensive than Biscayne, Parkway exceeds the 80th percentile of its hospital "peer group" in most financial screens.
The HCCB places each hospital in a certain peer group based on a number of factors including beds in service, physician mix, Medicare utilization, hospital services index, and median family income. The objective of peer groups is to batch hospitals with similar characteristics for comparison purposes. Biscayne and Parkway are in the same peer group for budget year 1984.
Each hospital is then compared to the 80th percentile in its peer group to determine whether that hospital "breaks the screen" or exceeds the standards set by law. "Breaking the screen" means that hospital is in the upper 20th percentile in its peer group.
For budget year 1983, Parkway broke the screen for cost per adjusted day and adjusted admission, total net revenue per adjusted day and adjusted admission, and rate of change increases (1980-1983) per adjusted admission and adjusted day. It should be noted that Parkway's screen breaking during this period is at least partly attributable to its 25 million dollar renovation- expansion project.
For budget year 1984, however, Parkway again broke the screens for cost per adjusted day, total net revenue per adjusted admission and adjusted day, and rate of change increases per adjusted admission and adjusted day for budget years 1981-1984. Biscayne did not break any of the screens during these same time periods.
As noted by the HCCB, Parkway's current profit margin is 13.5 percent compared to the 9.3 percent average for proprietary hospitals in Florida.
CONCLUSIONS OF LAW
A. Statutory and Rule Criteria in Issue.
The statutory criteria applicable to the applications of petitioners are contained in Section 381.494(6)(c), Florida Statutes. At the outset of the hearing, the parties stipulated that both applications comply with all relevant statutory criteria except the following:
The need for the health care facilities and services and hospices being proposed in relation to the applicable district plan and state health plan adopted pursuant to Title XV of the Public Health Service Act, except in emergency circumstances which pose a threat to the public health.
The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospices in the applicant's service district.
* * *
The probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health
services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and
cost-effectiveness.
The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction.
In addition, at the outset of the hearing, the parties stipulated that Rule 10- 5.11(15), F.A.C., contains the applicable rule criteria and that all relevant rule criteria have been satisfied by both applications except the following:
(h) Service Accessibility.
2. Hours of Operation. Every cardiac catheterization laboratory shall have the capability of rapid mobilization of the study team for emergency procedures 24 hours a day, 7 days a week . . . .
(i) Service Quality
4. Minimum Service volume. In order to assure quality of service, there shall be a minimum of 300 cardiac catheterizations performed annually in any adult cardiac catheterization laboratory within three years following its initiation of service . . . .
(i) 5. Coordination of Services.
Cardiac catheterization laboratories proposed in a facility not performing open heart surgery must submit, at the time of certificate of need application, a written referral agreement with a facility providing open heart surgery services which is within
30 minutes' travel time by emergency vehicle under average travel conditions.
Cardiac catheterization laboratories where coronary angioplasty is performed must be located in health care facilities which also provide open heart surgery.
(1) Need Determination. The need for cardiac catheterization capacity in a service area shall be determined by computing the projected number of cardiac catheterization procedures in the service area. The following formula shall be used in this determination:
Nx - Uc x Px
Where:
Nx = Number of catheterization procedures projected to be delivered in Year X;
Ic = 1981 use rate (number of procedures hundred thousand population) in the service area;
Px = Projected population in the service area in Year X; and,
Year X = The year in which the proposed cardiac catheterization laboratory would initiate service, but not
more than two years into the future.
(o) 1. There shall be no additional adult cardiac catheterization laboratories established in a service area unless:
The average number of catheterizations performed per year by existing and approved laboratories performing adult procedures in the service area is greater than 600; and,
The conditions specified in (i)4., above, will be met by the proposed laboratory.
3. Applications proposing to establish cardiac catheterization laboratories will not be approved if they would reduce the average volume of procedures performed by laboratories in the service area below 600 adult procedures
. . . based on projected need in the service area.
Applying the above formula for Need Determination, the evidence established a 1986 requirement for one additional cardiac catheterization laboratory in DHRS District XI. Therefore, it must be determined which of the two competing applicants best satisfies the above criteria.
Intervenor argues that neither application should be granted since no evidence was presented from which it could be determined that either cardiac catheterization unit would be available to meet the needs of indigent and medically underserved persons. Since Intervenor was not a party to these proceedings when the issues were framed, this objection comes too late. The parties initially determined those matters where material facts were in dispute and presented these issues only for resolution.
Intervenor further argues that the need determination procedure whereby the 0.8 was raised to 1, rather than rounding down to zero represents a change in agency policy tantamount to amendment of a rule. However, the evidence established that while the agency has, on occasion, erroneously interpreted its own rule, the correct procedure has been and remains that fractions 0.5 or above are rounded to the next higher whole number. Thus, there has been no impermissible change in agency policy or procedure.
Both Parkway and Biscayne satisfy the quality of care requirements set forth above. Biscayne is capable of mobilizing its laboratory on a 7 day, 24 hour basis, and of performing the required minimum 300 cardiac catheterizations per year, but could encounter some conflict in facility use under emergency conditions. With a dedicated cardiac catheterization laboratory, Parkway would have no such difficulty. However, both applications satisfy rule provisions on service accessibility and minimum service volume, even though Parkway's proposal is superior to Biscayne's in this regard.
Cost considerations are strongly emphasized in the statutory criteria set forth above. Biscayne's construction costs for this project as well as its service charges are expected to be significantly lower than Parkway's. This conclusion is reinforced by Biscayne's historically lower operating costs. The substantial savings which Biscayne will achieve through its innovative proposal to combine special procedures and cardiac catheterization, and through its better record of cost effectiveness, give its application an overall advantage over Parkway's.
The evidence established that both Parkway and Biscayne comply with the remaining rule criteria at issue. Both Parkway and Biscayne have submitted satisfactory written referral agreements with a facility providing open-heart surgery services within 30 minutes' travel time by emergency vehicle under average travel conditions as required by paragraph (i)5a. Since neither Parkway nor Biscayne proposes to perform coronary angioplasty in its proposed cardiac catheterization laboratory, paragraph (i)5b is not applicable to either proposal.
RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order granting the application of Biscayne Medical Center to establish cardiac catheterization capabilities in District XI, and denying the application of Parkway Regional Medical Center, Inc.
DONE and ENTERED this 8th day of March, 1984, in Tallahassee, Florida.
R. T. CARPENTER, Hearing Officer Division of Administrative Hearings The Oakland Building
FILED with the Clerk of the Division of Administrative Hearings this 8th day of March, 1984.
James C. Hauser, Esquire John H. French, Jr., Esquire Post Office Box 1876 Tallahassee, Florida 32302
Keith E. Rounsaville, Esquire Harold W. Mullis, Jr., Esquire Post Office Box 1102
Claire D. Dryfuss, Esquire Assistant General Counsel Department of Health and
G. Steven Pfeiffer, Esquire
David H. Pingree, Secretary Department of Health and
